SVB board bickering wasted crucial time before collapse

Savage Premium Subscription

Silicon Valley Bank lost a crucial day to raise money from investors after its board rejected executives’ financial projections, leading to a chaotic and ultimately doomed scramble for cash, people familiar with the matter said.

Coming into the weekend of March 4, SVB was facing a steep downgrade to its debt from Moody’s, the credit-rating agency, and had hired Goldman Sachs to advise on its options. The plan had been to sell a portfolio of underwater bonds and crystallize losses, and raise $2.25 billion in additional cash to shore up the lender’s finances.

Bankers were aiming to begin feeling out investors the following Tuesday, March 7, to gauge interest before a broader share sale was launched to the public. But before that could happen, SVB needed fresh financial projections, because circumstances had changed since CFO Dan Beck had reaffirmed rosy earnings guidance at a conference in mid-February.

On Monday, March 6, Beck’s team presented new numbers to SVB’s board, which believed they were too pessimistic — particularly on when venture fundraising, which was a key driver of SVB’s deposits and had cooled in recent months, would pick back up, people familiar with the matter said.

SVB’s executives had assumed it would be awhile, which meant that the firm’s startup clients would continue to spend down their deposits at the bank. Board members pushed for rosier forecasts, believing that venture firms sitting on record amounts of money would have to start investing it sooner.